Another round of coronavirus stimulus checks is unlikely to come from the federal government. Rather it could come from an unexpected corner, your car insurer. Yes, car insurers made massive profits last year due to the lockdown, and now, they are being pushed to pass on those benefits to their customers.
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During the pandemic last year, lockdowns and other restrictions significantly reduced the traffic on the roads in comparison to pre-COVID levels. This resulted in fewer road accident claims, and in turn, more profits for the car insurers. For instance, Geico’s pretax earnings tripled during Q2 and Q3 last year.
Many car insurers that witnessed a jump in their profits last year, have already rewarded their customers through discounts and rebates. According to the American Property Casualty Insurance Association (APCIA), insurance companies returned over $14 billion in the form of refunds and credits last year.
Still, many believe that those benefits aren’t enough. For instance, an analysis found that insurers have returned just a third of the extra profits they made. This is a primary reason why advocacy groups and some government officials are asking insurers to return more benefits to the policyholders.
Recently, the Consumer Federation of America and the Center for Economic Justice noted that insurers received $42 billion in excess premiums last year, but they only returned $13 billion in discounts and rebates.
“As we pointed out in letter after letter to insurance regulators throughout 2020, it was crystal clear that insurers’ premium relief was woefully inadequate,” CFA said in a press release.
Regulators Need To Step In
Despite the push from the advocacy group, insurers seem to be reluctant in returning more benefits to the policyholders, arguing that the traffic has now returned to a pre-pandemic level. Traffic returned to normal in spring 2021, as per the data from the Government.
Instead of returning benefits, some insurers, in fact, are planning to increase the premiums. For instance, State Farm has won the approval to hike premiums by about 4% in Louisiana. Moreover, it has also applied for increasing the premium in several other states, including Pennsylvania, Virginia, Connecticut, Georgia, West Virginia, Arkansas, Maine and Michigan.
So, unless regulators step in, it is very unlikely that insurers will pass on more benefits to policyholders. In some states, regulators actually have taken steps to ensure policyholders get what they deserve.
In March, California’s insurance commissioner ordered insurers to extend more discounts to policyholders. Massachusetts, Washington and New Mexico have also begun working on similar plans that ensure more benefits to policyholders.
There has even been class-action lawsuits filed in this respect. For instance, lawsuits filed in Nevada claim that many leading auto insurers are keeping premiums unreasonably high. A similar class-action lawsuit against Geico was certified in Illinois.